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Does fiscal cooperation increase local tax rates in urban areas

  • Charlot, S.
  • Paty, S.
  • Piguet, V.

The main purpose of this paper is to assess the effects of fiscal cooperation on local taxation in a decentralized country, using the French experience in urban municipalities. We estimate a model of tax setting for local business tax using spatial and dynamic econometric techniques, for the period 1993-2003 and an unbalanced data set. As predicted by the theory, we find that reducing the number of municipalities is likely to limit tax competition and, as a consequence, increase local business tax rates.

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File URL: http://www.grenoble.inra.fr/Docs/pub/A2012/gael2012-02.pdf
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Paper provided by Grenoble Applied Economics Laboratory (GAEL) in its series Working Papers with number 201202.

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Date of creation: 2012
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Handle: RePEc:gbl:wpaper:201202
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  4. Keen, Michael J. & Kotsogiannis, Christos, 2004. "Tax competition in federations and the welfare consequences of decentralization," Journal of Urban Economics, Elsevier, vol. 56(3), pages 397-407, November.
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  7. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  8. J. Elhorst, 2010. "Applied Spatial Econometrics: Raising the Bar," Spatial Economic Analysis, Taylor & Francis Journals, vol. 5(1), pages 9-28.
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  16. Michael J. Keen & Christos Kotsogiannis, 2002. "Does Federalism Lead to Excessively High Taxes?," American Economic Review, American Economic Association, vol. 92(1), pages 363-370, March.
  17. Heyndels, Bruno & Vuchelen, Jef, 1998. "Tax Mimicking Among Belgian Municipalities," National Tax Journal, National Tax Association, vol. 51(n. 1), pages 89-101, March.
  18. Hoyt, William H., 1991. "Property taxation, Nash equilibrium, and market power," Journal of Urban Economics, Elsevier, vol. 30(1), pages 123-131, July.
  19. Bernard FINGLETON & Julie LE GALLO, 2007. "Finite Sample Properties of Estimators of Spatial Models with Autoregressive, or Moving Average, Disturbances and System Feedback," Annales d'Economie et de Statistique, ENSAE, issue 87-88, pages 39-62.
  20. Emmanuelle Reulier & Yvon Rocaboy, 2009. "Regional Tax Competition: Evidence from French Regions," Regional Studies, Taylor & Francis Journals, vol. 43(7), pages 915-922.
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  22. Jan K. Brueckner & Luz A. Saavedra, 2000. "Do Local Governments Engage in Strategic Property-Tax Competition?," Econometric Society World Congress 2000 Contributed Papers 0357, Econometric Society.
  23. Michael Keen, 1997. "Vertical Tax Externalities in the Theory of Fiscal Federalism," IMF Working Papers 97/173, International Monetary Fund.
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